Much has been written about digitalization, AI, and machine learning, and how these developments signify the advent of the fourth Industrial Revolution.1 The development of new technologies continues to accelerate, and we’re already seeing digital business transformation begin to alter the DNA of business culture and structure. Essentially, we’re all looking at a new way of doing business.
Despite the rapid pace of technological change, however, this revolution is happening at a slower pace in the natural resources sector, where, and in my experience, the shift has been subtler than in other industries.
Before discussing this further, I’d like to clarify what certain terms mean in the context of this article, as they’re often used interchangeably. The following definitions come from Gartner’s “Information Technology Glossary”:
- Digital business transformation: The process of exploiting digital technologies and supporting capabilities to create a robust new digital business model.
- Digital transformation: This can refer to anything from IT modernization, to digital optimization, to the invention of new digital business models. It is more like “digitization” than “digital business transformation.”
- Digitalization: The use of digital technologies to change a business model and provide new revenue and value-producing opportunities.
- Digitization: The process of changing from analog to digital form, also known as digital enablement.
This article focuses on digitalization.
It’s changing the rules
Digitalization is not a tool or an ideology. It’s not a sudden radical change resulting from the introduction of the latest technology. Rather, it is a fundamental driver of business operations. That’s because it is an opportunity to reimagine how all the parts of the business connect and how they might be transformed. Think of the retail sector, for example, and how it has been radically transformed by e-commerce and the COVID-19 pandemic. Among the many changes in this sector, we’ve seen the shuttering of numerous brick-and-mortar outlets and technological advances that have made online shopping increasingly convenient and seamless.
In the natural resources sector, digitalization is reshaping how business landscapes are surveyed, sustainable operations are measured, the circular economy is foreseen, and departments interrelate. As the sector becomes more competitive in the face of higher costs and unpredictable commodity prices, companies are investing in new technologies to drive operational excellence while boosting profit margins, improving safety, and reducing speculative risk. The adoption of these new technologies is changing the way industries in the natural resources sector are creating value—I believe it’s reinventing the rules of business.
To date, we’ve seen AI and machine learning enhance and expedite some labour-intensive tasks in this sector, but we have yet to realize digitalization’s full potential—particularly in terms of how it could support the circular economy, where materials once viewed as waste are now being recovered, reused, and repurposed into value-added products. In the circular economy, many end-to-end activities are linked, and digitalization and data capture could co-ordinate all aspects of operations in the supply chain through its full cycle—for example, from extraction to reforestation.
“Digitalization is a driving force behind a number of industries. Circular economy, on the other hand, aims at optimizing resource use within industries. There is a clear connection between these two trends, and in order to accelerate change towards a sustainable circular economy, further coordination is needed.”
— Deloitte, “Circular Goes Digital,” deloitte.com
It’s driving the need for integration
Digitalization is no longer a choice but a necessity in this rapidly changing environment. We could accelerate its implementation in the natural resources sector by paying closer attention to the data and investing in data analytics.
The good news is that most organizations are already collecting and processing a significant amount of data. This is certainly the case in the natural resources sector, where data is collected throughout the business cycle—from locating to extracting and from transforming to recycling—all while adhering to regulatory compliance. Data analytics could help companies derive value from each stage of this cycle.
However, it is not simply a matter of gathering copious amounts of data. Without a proper plan and a systematic approach that considers the entire value chain,2 companies risk collecting too much irrelevant data. By capturing the right data from the start, organizations stand to save hours of analytical work, improve business outcomes, inform strategic decisions, and/or discover new opportunities. I think of this collection, analysis, processing, and reporting process as a big assembly line of data, with each part of the assembly line informing the next.
The finance department has a significant role to play here, as it is already collecting data at each critical stage and reporting it in a manner that allows for agile decision-making. Organizations can build on this data gathering platform as they create their digitalization initiatives. I also recommend that organizations establish a Digital Transformation Committee to consider all of the components involved in driving digitalization initiatives forward, including the integration of financial planning and analysis with data architecture, interdepartmental collaboration, and alignment with the organization’s capability model (the basic needs required to carry out the operating model).
It’s shaping the future
The extent to which digitalization will transform the natural resources sector remains to be seen, but there’s no question that it will. I believe focus groups and strategic communication are good mechanisms to foster familiarity with these concepts and remove the barriers to innovation. The more we talk about digitalization, the more we can understand how best to harness it.
Nancy Spagnut, CPA, CMA, has many years of international and varied experience in industry, including 17 years in the natural resources sector. She currently works in the forestry sector as a senior manager of accounting and digital finance at Canfor. Nancy has completed the Digital Transformation Leadership Program at SFU and is currently enrolled in UBC’s Forest Carbon Management Program.
This article was originally published in the November/December 2023 issue of CPABC in Focus.
Footnotes
1 See for example: McKinsey & Company, “What are Industry 4.0, the Fourth Industrial Revolution, and 4IR?” August 17, 2022.
2 Siddharth P., “Digital Transformation in Natural Resources Industry,” September 4, 2022.
